9848808
In this business domain, your brand should always stay lively. It is very important to know the standards of the market and if possible set a new benchmark that should be above the average of the industry. Customer acquisition cost helps you to understand how effective the sales and marketing efforts are. Considering the average of the industry will help you understand your position among the competitors. With CAC, a brand can adjust its marketing, and sales approach, optimize resource allocation, and strengthen overall profitability. Now let us look into the calculation of CAC.
Partnering with a mobile measurement partner (MMP) can enhance CAC analysis by providing accurate tracking, deeper audience insights, and attribution data. With this knowledge, brands can optimize resource allocation, refine marketing strategies, and improve overall profitability.
Calculation of CAC
The Customer Acquisition Cost is the total cost of acquiring a new customer. It includes marketing expenses, sales expenses, and other costs related to acquiring new customers. For this calculation, we divide the sum of total marketing and sales expense by number of new customers acquired. For example, if a company has spent Rs 100000 for marketing and sales and got 1000 new customers, then the customer acquisition cost is Rs 100. We should always try to make the CAC less than the average revenue per user (ARPU). That is the healthy CAC for most businesses. Customer lifetime value is an important metric considered by every brand. It is the net profit attributed to the entire future relationship with the customer. It is always sound to have a ratio of lifetime value to customer acquisition cost of 3:1 or higher. It is difficult to say what CAC is good or bad as that solely depends on the nature of your business. Several factors are present in this calculation, some of them are :
Combining market and sales costs. Considering one of these can lead to a faulty CAC.
Determination of the new customers should be from the same time frame as marketing and sales.